Businesses wishing to trade with the EU need to zoom in on finding an indirect representative in the EU argues Arne Mielken of Customs Manager Ltd.
Several clients of Customs Manager Ltd. are facing a similar problem. They are headquartered in the UK without a subsidiary in the EU. They are an international business that imports goods into one EU-27 Member State and export out of another. They have no legal presence in the EU.
Many sectors require agility and the possibility to respond quickly to emerging trends and opportunities. It is, therefore, important for any company to import and export out of any jurisdiction where customers are based with ease and flexibility.
Being in the UK, with full borders in operation from 2021 makes it not feasible to import goods into the UK and then ship them to the EU-27, clearing another border.
So, what solution?
Often, the traditional way is to establish a subsidiary or headquarters in the EU-27 to maintain operations. But this is not always desired.
Should they establish themselves in the EU in order to continue trading or is there a way to continue operating without this requirement?
The United Kingdom (UK) has left the European Union (EU) on 31 January 2020, 11 pm BST. The transition period, in which the UK remains aligned to the EU’s Single Market and Customs Union laws ended on 31 December 2020, 11 pm BST. Since this time, the UK has been considered as a third country to the EU and movements between the two territories are subject to the rules applicable to countries outside the EU.
This means that international trade rules, especially those rules which govern import and export of goods, including customs controls, apply. In particular, the rules of the Union Customs Code (UCC) as regards economic operators (companies) established outside the EU and wish to import into and export out of the EU will apply.
High-Level Consideration for NOT seeing up a business in the EU after 2021 (and still continue trading)
Here is what we believe are the issues that need to be considered, at a high level.
The GB EORI number stopped applying in the EU. By registering, for customs purposes, in an MS of the EU the EU-EORI number will be valid throughout the EU from 2021. To benefit fully from the use of this unique identification number, and non-EU business must use the EORI number in all communications with any EU customs authorities where this customs identifier is required,
Conclusion: Any UK business wishing to trade with the EU needs a European EORI number to import and export out of the EU. This can be obtained even for companies not established in the EU.
Imports, Exports & Freight Forwarders (Representation)
To import goods into the EU, or export goods out of the EU, a customs declaration must be lodged. There are several requirements as to who can lodge it, as well as when and how to lodge it. They are described in the UCC.
To lodge a customs declaration in the EU, you need to be established in the EU
A general rule is that a customs declaration may be lodged by a (natural or legal) person who can provide all the information required to bring goods into free circulation (= to import with customs duty charged). That person must also be able to present or have them presented to the customs' authority (for example, by your agent), together with all necessary documents. Moreover, a declarant must be established in the customs territory of the Union, as per Article 170 (2) of the UCC. There are three exceptions to this rule.
The requirement that a declarant has to be established in the customs territory of the Union means that a UK business would need to have a registered office, central headquarters or a permanent business establishment in the customs territory of the Union (UCC, Article 5 (31)).
Get a freight agent to do it for you
The UCC allows for a non-EU based entity to appoint a customs representative to act on their behalf when dealing with customs authorities. The law states that “any person may appoint a customs representative” (Article 18.2). However, this customs representative “shall be established within the customs territory of the Union.” In this way, the customs authorities now have an EU established party to take responsibility for the customs activities even where the trader is not established in the EU.
Understand the difference
However, there are two types of representation possible under Union Law: Direct and Indirect. Direct Representative acts in the name and on behalf of another person. The
Indirect Representative acts in his own name (Freight Forwarder) and on behalf of another person, where possible.
Regardless of the type of representation chosen, the lodging with the customs office of a declaration signed by the declarant or his representative imposes a serious responsibility. The declarant is responsible for the accuracy and completeness of the information in the declaration, the authenticity, accuracy, and validity of any document supporting it, and compliance with all obligations relating to entering the goods into free circulation.
When a UK business finds itself outside the EU and with no legal or physical presence, the customs representative will need to fulfil a wider role: namely as the trader’s sole representative in all dealings with the customs authorities. This implies a significant responsibility.
What you need to know about Indirect Representation
Two particular complications arise for imports, where Indirect Representation is considered:
1. While the declarant is usually always responsible for any arising customs debt, the indirect representative is jointly and severally liable for all customs liabilities arising from the customs related transactions.
2. However, when acting for a partly based outside the EU, the freight forwarder or agent will be, in fact, fully liable and be self-representing. As stated above, in this way, the customs authorities can pursue a party in the EU. After all, there is no other EU based party to take action against.
It is important to fully appreciate the customs representative’s liability relative to non-compliance and the determination of customs authorities to pursue outstanding liabilities. This explains why it may be challenging to find indirect representatives in the EU who are willing to cover imports.
An example of possible challenges (which can lead to investigations and fines) include:
Misdeclaration of the goods
Under declaration of value
Issues relative to origin rules
Anti-dumping duty infringements (where imposed)
Any of these problems, when discovered post clearance, are likely to lead to your customs representative incurring considerable additional administrative costs and debt, which will have to be paid and subsequently recovered by them. We would expect parties involved in indirect representation to have appropriate insurance in place to cover for any eventualities or challenges arising.
Exporting goods out of the EU without a permanent establishment
As regards, taking your metals out of the customs territory of the EU, please note that these are subject to customs supervision and may be subject to customs controls, too. An indirect representative needs to present these to the customs authorities before their exit and gain approval to export these (done electronically). Businesses should ensure they obtain proof of export from that agent (like a copy of a “goods departed message”).
Goods, when leaving the EU, will be subjected, as appropriate, to some checks for prohibited or restricted exports. These are justified on grounds of, amongst others, public security, the protection of health and life as well as international obligations. As a result, UK businesses wishing to export out of the EU may also need a licence or to follow special rules to export restricted good.
Conclusion: Without indirect representation, it is unlikely that a UK business will be able to import into or export out of the EU from 2021 where a company is not established in the EU. They may need to hire an EU-established agent to act as an indirect representative for you. Some express parcel operators can do this for you, but please check the conditions carefully to avoid delays.
If you have questions regarding this topic, please chat to us or email us.